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Citation Codes
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Case Number
Advocates
  • C.B. Agarwala
  • J. Swaroop and Satish Chandra - Gopi Nath Kunzru
Judges
  • Sankar Saran
  • Bind Basni Prasad, JJ.
Acts
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Citation Codes
Equivalent Citations
citation codes
Case Number
Advocates
  • C.B. Agarwala
  • J. Swaroop and Satish Chandra - Gopi Nath Kunzru
Judges
  • Sankar Saran
  • Bind Basni Prasad, JJ.
Acts
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Smart Summary

Judgment Summary — Revision concerning arbitration award (Sankar Saran, J.; Bind Basni Prasad, J.)

Factual and Procedural Background

The dispute arose between two firms — the plaintiff/applicant Jai Dayal Pearey Lal and the defendant/opposite party Chunni Lal Parsotam Das — both members of the Kanpur Sugar Merchants' Association. Pursuant to the Association's rules and bye-laws the dispute was referred to arbitration.

On 7 May 1941 the parties appointed Ram Sahai as sole arbitrator; he accepted but was unable to finish the arbitration. On 2 September 1943 the defendant's firm nominated Charan Das as its arbitrator, and on 3 September 1943 the Association Secretary notified the applicant that Charan Das had been appointed the sole arbitrator. The applicant protested and, on several occasions, sought relief under Section 33 of the Arbitration Act; ultimately the parties compromised under that provision and the applicant was permitted to appoint an arbitrator.

On 12 April 1944 the applicant appointed Man Singh as its arbitrator. The Association's rules required arbitrators to be nominees of firms listed as members. On 20 April 1944 the Secretary informed the applicant that Man Singh could not act because the firm he represented had withdrawn his name; the Secretary then asked the applicant to appoint another arbitrator. The applicant protested, contending Man Singh remained competent to act.

On 16 May 1944 the Secretary appointed Charan Das (the defendant's nominee) as sole arbitrator. Charan Das gave an ex parte award on 26 May 1944 and applied to the Court under Section 14 of the Arbitration Act (22 August 1944) for a decree in terms of that award. The trial Court set aside the award; the lower appellate Court reversed that decree and ordered the award to be made the rule of the Court. The present revision challenged the lower appellate Court's order.

Legal Issues Presented

  1. Whether the revision was maintainable (i.e., whether a question of jurisdiction arose such that the High Court could entertain the revision).
  2. Whether Charan Das, acting as sole arbitrator, had jurisdiction and authority to make the award in the circumstances of this case.
  3. Whether Man Singh ceased to be an arbitrator automatically when he ceased to be the representative of the member firm that had nominated him.
  4. Whether the Secretary of the Association's notice and consequent appointment of Charan Das as sole arbitrator complied with the Arbitration Act (notably the provisions referenced by the parties, including Section 9) and the Association's bye-laws.

Arguments of the Parties

Applicant (Jai Dayal Pearey Lal) — summarized from the opinion

  • The applicant consistently asserted that Man Singh, whom it had nominated, should be a party to the decision; therefore an award made by Charan Das alone lacked authority.
  • The applicant maintained that Charan Das could not act as sole arbitrator and that the award given by him was therefore null and void.
  • The applicant contended that the notice sent by the Secretary of the Association was not of the kind contemplated by Section 9 of the Arbitration Act (as relied upon by the opposite party) and so a sole arbitrator could not validly be appointed on that basis.

Opposite Party (Chunni Lal Parsotam Das) — summarized from the opinion

  • Learned counsel for the opposite party raised a preliminary objection that the revision was incompetent: the contention was that the lower appellate Court had exercised a jurisdiction vested in it by law and had acted without illegality or material irregularity, and therefore its order was not open to revision.
  • Counsel relied on precedent (Amir Hassan Khan v. Sheo Baksh Singh and two Privy Council decisions) to support the proposition that the appellate court's decision was not revisable.
  • It was also contended that this Court could not examine the powers of Charan Das to give the award (i.e., that the High Court should not go into the competency of the arbitrator who produced the award when considering the revision).

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Amir Hassan Khan v. Sheo Baksh Singh, 11 I.A. 237 (11 Cal. 6 P.C.) Relied upon by opposite party to support the preliminary objection that the appellate Court's order was not amenable to revision (i.e., that the lower Court had exercised jurisdiction and the order was not revisable). The Court considered the reliance but rejected the preliminary objection: it held that a question of jurisdiction did arise and therefore the revision was maintainable. The precedent did not prevent the High Court from entertaining the revision on the jurisdiction point.
Venkatagiri Ayyangar v. Hindu Religious Endowments Board Madras, 1949 A.L.J. 213 : (A.I.R.(36) 1949 P.C. 156) Relied upon by opposite party for the same preliminary proposition that the lower appellate Court's decision could not be revisited by revision. The Court did not accept that reliance as dispositive. It held that because the applicant's challenge raised the question whether the arbitrator had any authority (a jurisdictional question), revision was maintainable despite the cited Privy Council authority being pressed by the opposite party.
Joy Chand Lal v. Kamalaksha Chaudhry, 1949 A.L.J. 278 : (A.I.R.(36) 1949 P.C. 239) Also relied upon by opposite party for the proposition that the lower Court's exercise of jurisdiction was not open to revision. The Court noted the reliance but proceeded to determine that the jurisdictional issue (whether the award was made by a competent person) allowed the High Court to entertain the revision; the cited decision did not foreclose this inquiry in the present facts.

Court's Reasoning and Analysis

The Court's analysis proceeded in stages, addressing first the preliminary objection of incompetency of the revision and then the substantive questions about the arbitrators' authority.

1. Maintainability of the Revision (jurisdictional question)

The Court (both judges) concluded that the revision was maintainable because the central contention raised by the applicant — that Charan Das had no authority to act as sole arbitrator and therefore his award was void — directly implicated the jurisdiction of the Courts below to pass a decree in terms of that award. If the award was not an award at all (because made by a person without authority), the Courts below had no jurisdiction to pass a decree based on it. Accordingly, a question of jurisdiction arose and the High Court could entertain the revision despite the opposite party's reliance on authorities to the contrary.

2. Whether Charan Das could act as sole arbitrator

The Court found that Charan Das could not validly give an award as sole arbitrator in the circumstances. The core legal inquiry was whether Man Singh ceased to be an arbitrator ipso facto when he ceased to represent the member firm Onkar Prasad Mahadeo Prasad.

The Court examined the Association's documents and the Arbitration Act:

  • Article 21 of the Association's Memorandum required members to nominate an adult person as their representative and to enter such representatives in the register.
  • Bye-law 63 limited arbitrators to persons who were representatives of members of the Association.
  • However, the Arbitration Act provisions (as cited in the opinion) govern the authority of appointed arbitrators. The opinion quotes provisions (referred to variously as Section 5 and Section 6 in different passages of the judgment) to the effect that the authority of an appointed arbitrator is not revocable except with the leave of the Court, unless a contrary intention is expressed in the arbitration agreement.
  • The Court found no contrary intention in the appointment agreement or the Association's arrangements that would render an arbitrator's authority revocable automatically upon cessation of his representative status.
  • Section 9 of the Arbitration Act (as cited) lists specific contingencies permitting appointment of a fresh arbitrator: neglect or refusal to act, incapacity of the arbitrator, or death. None of those contingencies were shown to exist regarding Man Singh.

On these bases the Court concluded that Man Singh's subsequent loss of status as a representative did not ipso facto terminate his authority as an appointed arbitrator. He remained a persona designata with authority to act unless and until his authority was properly revoked with the leave of the Court (or another statutory contingency occurred). No steps were taken to secure such revocation, and no statutory contingency for replacement under Section 9 arose.

3. Validity of the Secretary's notice and appointment of a sole arbitrator

The Court considered the separate question whether the Secretary of the Association's notice and the consequent appointment of Charan Das as sole arbitrator were proper. The applicant argued the notice was not of the kind contemplated by Section 9 of the Arbitration Act. The Court observed that the Secretary is the agent of the Association members and that the notice sent by him should be regarded as a notice from the party concerned; the judge stated that he saw no invalidity in the notice itself.

Even though the Court found no invalidity in the form or source of the notice, that did not cure the more fundamental defect: an award purporting to be the unanimous or collective decision of arbitrators when one of the appointed arbitrators (Man Singh) remained authorised to act could not be treated as a valid award when made solely by the other arbitrator. Consequently, the award produced by Charan Das alone was treated as a nullity in substance.

4. Conclusion of the reasoning

Applying the Arbitration Act provisions and the bye-laws, and having found no statutory basis for ipso facto revocation of Man Singh's authority upon his ceasing to be a representative, the Court held that Man Singh retained authority as an arbitrator and that an award made by Charan Das alone — without participation of Man Singh — was not a valid award. In the words of the judgment, the document purporting to be an award by Charan Das alone was "waste paper."

Holding and Implications

Holding: The revision was allowed with costs; the order of the lower Appellate Court was set aside and the decree of the trial Court was restored.

Implications:

  • Direct effect on the parties: The ex parte award of Charan Das was not treated as a valid award for the purposes of obtaining a decree in terms of it; the trial Court's decision (which had set aside the award) was restored.
  • Broader legal impact: The opinion does not announce or purport to establish a novel legal principle beyond applying existing provisions of the Arbitration Act and the Association's bye-laws to the facts. The Court's decision rests on the conclusion that an arbitrator's authority is not automatically revoked by his ceasing to be a representative of a nominating party unless the arbitration agreement or statute provides otherwise or the Court grants leave; no new precedent beyond the adjudication of these facts is expressly claimed in the text.
K.S

Order pronounced: Revision allowed. (Final line of the opinion: "Revision allowed.")

Show full summary ...

    Jai Dayal Pearey Lal v. Chunni Lal Parsotam Dass

    Sankar Saran, J.:— This is a revision against an order by the Civil Judge of Kanpur reversing the decree of the trial Court and remanding the case to the Court below for ordering an award to be filed and for making it the rule of the Court.

    2. The plaintiff, applicant Jai Dayal Pearey Lal and the defendant opposite party Chunni Lal Parsotam Das are two firms, members of the Kanpur Sugar Merchants' Association here after to be referred to as the Association. There was a dispute between the parties and according to the rules and bye-laws of the Association it was referred to arbitration. On 7th May 1941 one Ram Sahai was appointed the sole arbitrator by the parties and he accepted that office. Ram Sahai couli not, however, finish the work of arbitration. On 2nd September 1943, the firm Chunni Lal Parsotam Das nominated one Charan Das as its arbitrator. On 3rd September 1943, the Secretary of the Association sent a notice to the applicant firm Jai Dayal Pearey Lal that Charan Das was appointed the sole arbitrator. The applicant protested against Charan Das being appointed the sole arbitrator. Thereupon, on 9th September 1943 the Secretary of Association gave three days' time to the applicant to nominate another arbitrator. On 6th January 1944, the applicant protested sole, graphically saying that Charan Das could not act a an arbitrator and that the arbitrator was Ram Sahai. The applicant followed up this protest by applying under Section 33 of the Arbitration Act praying the Court to stay proceedings. Subsequently, there appears to have been a compromise between the parties and the applicant was allowed to appoint an arbitrator.

    3. On 12th April 1944, the applicant firm appointed one Man Singh as its arbitrator. According to the rules of the Association only a nominee of a firm which was on the list of members of the Association could be appointed an arbitrator. On 20th April 1944, the Secretary of the Association informed the applicant that Man Singh could not act as an arbitrator because the firm which he represented had withdrawn bis name. In the circumstances the Secretary of the Association asked the applicant to appoint another arbitrator. Upon this, the applicant protested saying that Man Singh was still competent to function as an arbitrator. On 16th May 1944, the Secretary of the Association appointed Charan Das, who was the nominee of the defendant opposite party, as the sole arbitrator.

    4. On 26th May 1944, Charan Das gave his award ex parte. On 22nd August 1944, Charan Das made an application to the Court under Section 14 of the Arbitration Act, praying that a decree be passed in terms of his award. As has been mentioned above, this prayer of Charan Das was not accepted by the trial Court which set aside the award and the lower appellate Court reversed the decree of the first Court and ordered that the award be made a rule of the Court.

    5. Shri Gopi Nath Kunzru, learned counsel for the opposite party, raised a preliminary objection that this revision was incompetent. His contention was that the lower appellate Court exercised a jurisdiction vested in it by law and it acted in the exercise of that jurisdiction without illegality or material irregularity. He has placed reliance upon the well known case of Amir Hassan Khan v. Sheo Baksh Singh, 11 I.A 237 : (11 Cal. 6 P.C) and upon two other recent cases of their Lordships of the Privy Council, Venkatagiri Ayyangar v. Hindu Religious Endowments Board Madras, 1949 A.L.J 213 : (A.I.R(36) 1949 P.C 156) and Joy Chand Lal v. Kamalaksha Chaudhry, 1949 A.L.J 278 : (A.I.R(36) 1949 P.C 239). For the reasons to be detailed hereafter I am unable to accept this contention of the learned counsel.

    6. The question that has to be considered is whether the award by Charan Das, the sole-arbitrator, was within his jurisdiction. If the answer is in the affirmative, there would be an end to this application. I am, however, of the opinion that Charan Das, in the circumstances of the case, could not give an award as the sole arbitrator. The question that needs declaration is whether when Man Singh, who was appointed an arbitrator by the Secretary of the Association, ceased to represent the firm Onkar Prasad Mahadeo Prasad be ceased also ipso facto to be the arbitrator in these proceedings. Article 21 of the Memorandum of Association reads as follows:

    “Every member will have to nominate one adult person as his representative, and the names of such-representatives will be duly entered in the register of’ members of the Association……”

    7. According to bye-law 63 of the Association only such persons could act as arbitrators-who were representatives of the members of the-Association. Now, Man Singh was appointed an arbitrator as a representative of a member of the Association and when he ceased to be the representative of the member did he cease to be an arbitrator? There are no provisions in the rules to that effect and the law of arbitration does not contemplate the removal of an arbitrator in such a manner. Section 5 of the Arbitration Act, reads as follows:

    “The authority of an appointed arbitrator or umpire shall not be revocable except with the leave of the Court, unless a contrary intention is expressed in the arbitration agreement.”

    8. There is no contrary intention expressed—in the agreement by which the arbitrators were appointed in the case and no steps were taken to move the Court for the revocation of the authority given to Man Singh. Section 9 of the Arbitration Act provides for the parties in certain eventualities to appoint fresh arbitrators. Those provisions are specific. They provide for certain contingencies, for example, if the arbitrator neglects or refuses to act, or is incapable of acting, or dies, the party which appoints him may appoint a new arbitrator in his place. None of these contingencies arise in this case and, therefore, it cannot be said that the intimation given by the Secretary of the Association that Man Singh had ceased to be an arbitrator, was proper.

    9. For the reasons given above, I would allow this revision with costs, set aside the order of the lower appellate Court and affirm the decree of the trial Court.

    Bind Basni Prasad, J.:— I agree and desire to add a few words. Three points are involved in the present revision. The first point arises from the preliminary objection taken by learned counsel for the opposite party, namely, whether or not the revision is maintainable. It is now a well established rule of law that a revision is maintainable only when the question of the exercise of jurisdiction by the Court below is involved. In the present case, from the facts stated by my learned brother, it will be evident that the point raised consistently by the applicant has been that Charan Das had no authority or jurisdiction to deal with the case as a sole arbitrator and for that reason the award given by him was null and void. If Charan Das had no authority to give an award, the document filed by him in the Court below purporting to be an award was a waste paper, and, as such, the trial Court or the lower appellate Court had no jurisdiction to pass a decree in terms of that award. It is thus clear beyond doubt that a question of jurisdiction is involved.

    10. Learned counsel for the opposite party contended that this Court could not go into the powers of Charan Das for giving an award. I do not agree with this contention When an application is made under Section 14 of the Arbitration Act it has to be seen whether the award was made by a competent person. If what purports to be an award was made by a person who had no authority to make it, it is not an award and no decree in terms of it can be passed. The jurisdiction of the learned Munsif rested upon the fact whether Charan Das had the authority to act so as a sole arbitrator. The preliminary objection, in my view, has no substance because the point of jurisdiction clearly arises in the present case.

    11. The second point is whether Charan Das could act as sole arbitrator. As a result of the compromise arrived at between the parties in the proceedings under Section 33 of the Arbitration Act each party was entitled to appoint an arbitrator and the case was to be decided by both the arbitrators collectively. The applicant appointed Man Singh and the opposite parts appointed Charan Daa. The applicant maintained throughout that Man Singh should be a party to the decision of the case, but the Secretary of the Association thought otherwise. He was of the view that as Man Singh had ceased to be a representative of a member of the Association he had no authority to act as an arbitrator. This view has found favour with both the-Courts below. I am clearly of opinion that the conclusion at which the Courts below reached was not correct. Bye-law 60 framed by the Kanpur Sugar Merchants' Association provides-that if there is anything inconsistent between the bye-laws and the provisions of the Arbitration Act, the latter shall prevail. I must, there, fore, look to the Arbitration Act to decide whether the contention that Man Singh ceased to have authority to Act as an arbitrator is-correct or not. Section 6 of the Arbitration Act provides that the authority of an appointed arbitrator or umpire shall not be revocable except-with the leave of the Court, unless a contrary intention is expressed in the arbitration agreement. No arbitration agreement was drawn up in the present case. The arbitration proceedings started by virtue of the parties being members of the Association which provided that the dispute among the members shall be decided by arbitration. The bye-laws do not provide, in express terms that an arbitrator shall cease) to have authority as such by ceasing to be the representative of a member of the Association. Then S. 9 of the Act provides that another person can be appointed in place of a duly appointed arbitrator only in certain specified circumstances, namely, neglect or refusal by the arbitrator to act, his incapacity of acting or his death. There is nothing on the record to show that Man Singh ever neglected or refused to act and arbitrator that he became incapable of acting. Needless to say that he is alive. None of the contingencies contemplated by Section 9 of the Arbitration Act exist in the present case. Has Singh was eligible to be appointed as an arbitrator on the date on which the applicant appointed him as such. His subsequent disqualification has not the effect of taking away from him the authority of an arbitrator because the Arbitration Act makes no such provision. He was a persona designata and there was nothing in his appointment to show that he was to act as an arbitrator only so long as he was a representative of a member of the Association.

    12. What purports to be an award in the present case is a waste paper because it has been made by Charan Das alone and the other arbitrator is no party to it. I am of opinion that Man Singh who was nominated by the applicant as an arbitrator, has still the authority to act as such.

    13. The third point raised was whether the appointment of Charan Das as the sole arbitrator was correct. In this contention learned counsel for the applicant argued that the notice which was sent by the Secretary of the Association to the opposite party was not one contemplated by Section 9 of the Arbitration Act and, therefore, a sole arbitrator could not be appointed. I am of opinion that the Secretary of the Association is the agent of all the members of the Association and the notice sent by him should be regarded as a notice from the party concerned. I see no invalidity in the notice.

    14. By the Court.—The revision is allowed with costs, the decree of the lower Appellate Court is set aside and that of the trial Court is restored.

    K.S

    15. Revision allowed.

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    Comments

    Jai Dayal Pearey Lal v. Chunni Lal Parsotam Dass
    (Aug 4, 1950)